Tokyo, Seoul Head Asian Market Train Wreck
Asian markets were massacred Friday, led by a 9.6 percent plunge in the Nikkei, as the global economic slowdown slashed earnings prospects for an array of companies, forcing investors to look to safer government bonds.
The stronger yen has been particularly damaging to the competitiveness of Japanese exporters as it curbs their overseas profits when they are brought home and erodes the competitiveness of their products. A handful of companies that have expressed positive outlooks have not been able to turn investor sentiment around to focusing on value rather than on the uncertainty of economic factors.
The yen climbed against the euro and other high-yielding currencies on rising risk aversion, hitting a 13-year high against the U.S. dollar . Oil prices gained on expectations OPEC would agree to cut output in an emergency meeting in Vienna, with Iran suggesting that it lower production by 2 million barrels a day. Crude futures are currently trading above $68 a barrel.
Japan's Nikkei 225 Average plunged 9.6 percent to hit a 5-½ year closing low, having lost 50 percent this year, with exporters hit by the double punch of a Sony profit warning and a sharply higher yen. Sony plunged more than 14 percent after the company halved its full-year profit forecast by 57 percent, to far below market estimates in its second downward revision this year, blaming a firmer yen and slowing demand for cameras and flat TVs.
Seoul shares plummeted 10.6 percent, with the benchmark Kospi posting its biggest weekly loss since it started running in 1983, as a bleak economic outlook panicked investors into dumping shares. The Kospi ended down 111 points to close
at 938.75 points, its lowest finish since May 2005. The loss on the week run up to more than 20 percent, outstripping the previous record weekly fall seen in the 1997/98 Asian financial crisis. Shares in Samsung Electronics plunged 13.8 percent to their lowest close since Dec. 2004. A bearish outlook with third quarter results from the world No.1 memory chip and LCD screen maker further spooked already panicky investors.
Australian shares fell 2.6 percent to close at four-year lows, joining a rout across Asian equity markets on worries that a likely global recession would slash company earnings. The market quickly reversed an initial 1.1 percent gain as banking stocks slid and leading miners extended the week's steep falls on soft commodities prices. Shares in fund manager Perpetual slumped 6.8 percent after suspending redemptions in several of its funds, along with several other investment firms, to halt an exodus of cash into local banks covered by a government deposit guarantee. Axa Asia Pacific, which also halted redemptions on an income fund, saw its shares fall 8 percent.
Hong Kong shares slid 8.3 percent to a four-year low on pessimism over corporate earnings amid the global economic slowdown, with HSBC and Standard Chartered slammed on rising bad debts in Asia. The Hang Seng Index, which slipped below 13,000 for the first time since 2004, will end the week nearly 10 percent lower while having shed close to 53 percent so far this year. Shares of HSBC plunged to a five-year low after the U.S. investment bank cut its target price amid a negative outlook for emerging markets growth.
Singapore's Straits Times Index extended losses to fall 8.7 percent to a five-year low, as
regional markets slid and after mid-session data showed further weakness in the property sector. The country's top two property developers CapitaLand and City Developments both fell over 5 percent, after government data showed third quarter home prices fell a bigger-than-expected 2.4 percent from the previous quarter.
China's Shanghai Composite Index fell 1.9 percent, led by bank and property shares, but the market was far more resilient than its Hong Kong counterpart, sending the A-H share premium to a seven month high. Bank shares fell for a second day, on fears of slowing profit growth and rising bad loans, while property shares succumbed to profit-taking after gains the previous day spurred by the announcement of government measures to bolster the sector.